Delta Air Will Rely on Partnerships to Expand Routes in Asia

Updated on
  • Carrier signed pact in September with China Eastern Airlines
  • No plan to start flights to second-tier cities in China

Delta Air Lines Inc. will rely on partnerships with China Eastern Airlines Corp. and Jet Airways India Ltd. to improve connectivity to Asia’s largest economies, a senior executive for the region said.

“We are going to continue to grow in areas where the economies are growing, and China’s clearly one of them,” Vinay Dube, Delta’s senior vice president for Asia, said in an interview Wednesday on Bloomberg Television.

Dube said Delta will work with its Chinese partner on flights to smaller cities even as major ones such as Beijing and Shanghai continue to offer growth potential. Delta, second-ranked among U.S. carriers in terms of traffic across the Pacific, on Tuesday predicted falling fuel costs will help the airline save more than $3 billion this year, when it expects to pay the lowest price for fuel since 2008.

“Just because we are turning over a lot of cash doesn’t mean all of that’s going to go into new planes and new routes,” Dube said. “We want to remain very disciplined in the way we invest.”

Delta said Tuesday that cheaper oil helped it post a 43 percent jump in fourth-quarter profit, excluding some items, to a record $926 million.

The carrier invested $450 million in September for a 3.6 percent stake in Shanghai-based China Eastern, the country’s second-largest airline by passenger traffic. Three months later, with KLM Royal Dutch Airlines, it co-signed a code-share agreement with Jet Airways -- India’s second-largest airline by market share and passengers -- aimed at restoring connectivity to India after it scrapped flights there in November 2014. All four carriers are members of the SkyTeam Alliance.

Chinese Plan

Delta trails United Continental Holdings Inc. in flights across the Pacific. While Delta has an Asian hub in Tokyo, Chicago-based United has a head start in offering flights to secondary Chinese cities, such as Chengdu in southwestern Sichuan province.

In July, Delta Chief Executive Officer Richard Anderson said he envisions creating another Asian hub in Shanghai to build on the growing relationship with China Eastern. A hub modeled on operations at Amsterdam’s Schiphol Airport would let Delta collect domestic passengers from around China and steer them to U.S. destinations.

“We don’t have plans in the immediate future to grow into tier-two cities in China because we think Beijing and Shanghai still have a lot of growth prospect for Delta in the next three to five years,” Dube said. “We also know not everybody wants to fly into Beijing, Shanghai and Guangzhou, so we have to work with our partner to take them into the interior points of China.”

Indian Market

As for India, the company pulled out of that market because government subsidies given to carriers from the Middle East have created an uneven playing field, Dube said. He didn’t specify whether Delta plans to restart its own flights there.

“We’re going to continue to leverage partnerships around the world for our benefit and our partners’ benefit as well,” he said. “That’s part of our DNA.”

— With assistance by Clement Tan, and Angie Lau

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